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Minimum wage issue carries a lot of risk

The Lowell Sun

Updated:
06/19/2013 08:44:50 AM EDT

The minimum-wage debate is heating up on both the state and federal levels. Advocates for raising the minimum wage say it will help low-income workers to improve their lot; opponents say a mandatory wage increase will hurt business and consumers, since employers will either cut jobs, reduce workers' hours, or pass on the increased costs to consumers.

All of the above is likely to happen although, quite frankly, it will have little overall impact on the broad economy.

Some employers and employees will be helped while others will be hurt.

Boats will rise and boats will sink.

So what's the government to do?

Listen. Learn. Move cautiously.

President Barack Obama is proposing to raise the federal minimum-wage standard in stages, from $7.25 an hour to $9 an hour to help poor families.

In Massachusetts, Gov. Deval Patrick is proposing a more ambitious plan. The state's minimum wage would increase from $8 an hour to $11 by 2015 -- a 37.5 percent increase. He'd also like to tie future increases to inflation.

In addition, the minimum wage for restaurant workers who rely on tips would increase from $2.63 an hour to $6.30 -- a 139 percent increase.

While legislators must be sensitive to the plight of low-wage workers, they must be keenly aware of what that added cost will do to the job creators. Employers are still trying to figure out the impact of the Affordable Care Act on their bottom lines. They don't need more headaches.

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According to the National Employment Law Project, a liberal think tank in Washington, more than 809,000 Massachusetts workers earning $8 or more an hour would get raises if the wage law is adjusted to $11.

On the other side, the Employment Policies Institute, which receives funding from the restaurant industry, says a wage increase to $9 an hour would result in the loss of 1,270 to 3,500 entry-level jobs.

An interesting statistic in this debate comes from a Boston Globe story that quoted David Neumark, an economics professor at the University of California-Irvine and co-author of the book Minimum Wages. He concluded that when minimum wages increased, some low-wage workers lost money from reduced hours. He also said about 33 percent of minimum-wage workers are in families earning more than $55,000 a year, which puts them in the top 50 percent of income distribution nationally.

"Most families are poor because they have no workers, not because they have low-wage workers," Neumark told The Globe.

We'd advise the Legislature to give this issue more study. The key to wiping out poverty is increasing educational opportunities for those who want good jobs, not putting pressure on both employers and employees -- and ultimately consumers -- to go along with feel-good legislation.

If it's true that the state has nearly 809,000 minimum-wage jobs out of a workforce of 3.4 million -- 23.7 percent -- it should not be considered a great economic achievement ripe for reward.

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